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DigitalOcean raises $100M in debt as it scales toward revenue of $300M

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Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#281

Post by juped »

rsync wrote: post #26

"Spruill told TechCrunch that DigitalOcean will scale to $1 billion in revenue in the next five years, and it will become free cash flow profitable (something the CEO also referred to, loosely, as profitability) in the next two." I find this to be incredible. DO is not a speculative e-business ... they are not a social network. They are the proverbial sellers of picks and shovels during the gold rush: "The way to get…

It's an amazing (good) achievement that they were able to debt finance, and really improves their credibility as a business in my estimation.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#282

Post by cdolan »

lowdose wrote: post #280
cdolan wrote: post #15

This article had more detail and substance than I usually find on TechCrunch or startup coverage in general. I do want to point out two things that bothered me in the article: 1. Using the word “raise” when talking about financing via debt seems inappropriate and very start-upy. This is a low cost of capital line of credit, is it not (due to their infrastructure and broad customer base)? 2. Why in the world are state…

Debt is a way to leverage in finance that leads to more return on equity. It is very healthy to pursue debt at this level and will have a positive effect on free cash flow especially with negative interest rates.

Sorry but how does this relate to my comment?

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#283

Post by ToFundorNot »

scarface74 wrote: post #177
chii wrote: post #175

Earlier quoted context omitted.

> If you depreciate an asset down from $1000 to $0 in 3 years, you’re accounting for the fact that in three years you are going to have to replace it. but does a company have to be "honest" about such depreciations? What if the asset isn't actually losing value at the stated depreciation rate? Then at the end of the depreciation period, the company may still extract the residual value by either selling or continue us…

The asset will eventually have to be replaced. In the long term, it doesn’t make a difference - ignoring the time value of money. Theoretically, the only reason we have depreciation expenses at all instead of just expensing the entire cost at once (cash accounting) is that we decided that accrual accounting was more representative than cash based accounting. I am not an accountant. I’m an MBA dropout after almost fin…

Also, taxes. If we were able to fully expense capital plants and equipment, there wouldn't a single company paying taxes, they would continually purchase more to offset profit, eliminate taxation, and accelerate growth.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#284

Post by kaetemi »

amscanne wrote: post #224
kaetemi wrote: post #186

Earlier quoted context omitted.

Imagine you're a growing startup, and you have a yearly recurring investment (you're growing, after all!) of $1000 that's linearly depreciated over 5 years. Let's say your income is 1100$ each year. Your profit, according to accounting, would be 900$ for the first year, counting only $200 of the investment, then for the following years you'll see a profit of $700, $500, $300, and $100, as the investments accumulate.…

In year one, you’re generating $1100 of income with $1000 of capital invested (that will last 5 years). By year five, you’re generating $1100 of income with $5000 of capital invested (that will require $1000 each year to keep up). You’re _way_ better off in year one here, so it seems the GAAP approach is actually showing the decline accurately. This isn’t a growing startup, it’s a startup needing more equipment to ma…

You're right, growing capital but not growing income... I made a poor example.

(Imagining a bottom pricing scenario, while keeping a positive cashflow.)

Good point. At year 6 this logic breaks down. (Then again, no longer a 'startup' at that point.) Better hope the replacement equipment is double worth it's money. :)

Should make some spreadsheets with more scenarios.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#285

Post by kaetemi »

amscanne wrote: post #224
kaetemi wrote: post #186

Earlier quoted context omitted.

Imagine you're a growing startup, and you have a yearly recurring investment (you're growing, after all!) of $1000 that's linearly depreciated over 5 years. Let's say your income is 1100$ each year. Your profit, according to accounting, would be 900$ for the first year, counting only $200 of the investment, then for the following years you'll see a profit of $700, $500, $300, and $100, as the investments accumulate.…

In year one, you’re generating $1100 of income with $1000 of capital invested (that will last 5 years). By year five, you’re generating $1100 of income with $5000 of capital invested (that will require $1000 each year to keep up). You’re _way_ better off in year one here, so it seems the GAAP approach is actually showing the decline accurately. This isn’t a growing startup, it’s a startup needing more equipment to ma…

Amusingly, assuming the example company's pricing remained the same throughout rather than cutting prices each year, the client base ends up fixed, the clients get 5x better service by the 5th year, while accounting shows a decline in performance.

External perception of business health (5x better service!) unintuitively is masking the the accounting reality here (worsening returns).

(Now look at all these cloud services giving better services and pricing every year, seemingly very healthy...) :)

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#286

Post by scarface74 »

ToFundorNot wrote: post #283
scarface74 wrote: post #177

Earlier quoted context omitted.

The asset will eventually have to be replaced. In the long term, it doesn’t make a difference - ignoring the time value of money. Theoretically, the only reason we have depreciation expenses at all instead of just expensing the entire cost at once (cash accounting) is that we decided that accrual accounting was more representative than cash based accounting. I am not an accountant. I’m an MBA dropout after almost fin…

Also, taxes. If we were able to fully expense capital plants and equipment, there wouldn't a single company paying taxes, they would continually purchase more to offset profit, eliminate taxation, and accelerate growth.

Is that a bad thing?

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#287

Post by Legogris »

dkersten wrote: post #248
Legogris wrote: post #244

Earlier quoted context omitted.

Their documented "minimum requirements" are quite ridiculous TBH. I mean, officially Vault requires 6 Consul servers (dedicated to Vault, mind you) to be considered ready for production. I doubt most companies using Vault with Consul follows this. You I think you could be fine with 3 of the smallest machine types.

That’s basically what put me off trying nomad. Nit just the minimum number, but also their stated hardware requirements. From their documentation: Nomad servers may need to be run on large machine instances. We suggest having between 4-8+ cores, 16-32 GB+ of memory, 40-80 GB+ of fast disk and significant network bandwidth Basically the cost if the Nomad masters would be much greater than the cost of what would run my…

Maybe there's some element of "geek macho" from their side here, but this is their recommendation for a supporting a "small" workload, where I suspect you find yourself on the very low end of that.

Like, you're not doing "big data" unless we're talking petabytes per day.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#288

Post by dannyw »

SahAssar wrote: post #276
dannyw wrote: post #223

Earlier quoted context omitted.

Very happy BuyVM customer. The unmetered bandwidth really is unmetered, and support from the founder has been remarkably transparent and often minutes when he's awake and working.

Have you checked the performance of their VPS:es? Any numbers to share? I've been thinking of using them because of their anycast support.

CPU:

    model name : Intel(R) Xeon(R) CPU E3-1270 v3 @ 3.50GHz
So yes, it's a 7 year old quad core, with maximum of 32 GB of RAM. You only get access to one core (technically thread); 512NB to 2GB nodes can burst to use the full thread, but are expected to not 100% it. The 4GB node (1/8th of the server) is allowed to fully peg their thread.

Some of the newer servers are powered by AMD Ryzens, which is a great thing (they are far better perf/$ now; they're on GCP, and Tencent is deploying tens of thousands of ryzens in their DC).

I have a 2GB node, and I've ran Geekbench 5 and got a score of 661. Here are the results: https://browser.geekbench.com/v5/cpu/1278946

For comparison, a Vultr 1GB ($5/m) has a geekbench score of 2413.

For most web server needs, BuyVM should suffice.

Yes, other providers are much faster; but other providers don't offer unmetered bandwidth. BuyVM is great for bandwidth heavy, compute-low loads.

Re: DigitalOcean raises $100M in debt as it scales toward revenue of $300M

#289

Post by ToFundorNot »

scarface74 wrote: post #286
ToFundorNot wrote: post #283

Earlier quoted context omitted.

Also, taxes. If we were able to fully expense capital plants and equipment, there wouldn't a single company paying taxes, they would continually purchase more to offset profit, eliminate taxation, and accelerate growth.

Is that a bad thing?

As far as governments are concerned, yes, as they will never get tax revenues from companies if they are allowed to fully expense large purchases.
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